Applewood Residential Developments Pty Ltd v Commissioner of State Revenue
[2006] VSCA 207
•11 October 2006
SUPREME COURT OF VICTORIA
COURT OF APPEAL
No. 8009 of 2004
| APPLEWOOD RESIDENTIAL DEVELOPMENTS PTY LTD | Applicant |
| v. | |
| COMMISSIONER OF STATE REVENUE | Respondent |
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JUDGES: | CHERNOV, NETTLE and REDLICH, JJ.A. | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 21 September 2006 | |
DATE OF JUDGMENT: | 11 October 2006 | |
MEDIUM NEUTRAL CITATION: | [2006] VSCA 207 | |
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LAND TAX – Exemption – Land used and occupied as a retirement village and for no other purpose – Retirement village being developed in stages – Whether uncompleted stages of development were used and occupied as a retirement village – Land Tax Act 1958, ss.3(1), 9(1)(j), 9(2AA) and 9(2AB).
Words and phrases – “Used and occupied”.
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| APPEARANCES: | Counsel | Solicitors |
| For the Applicant | Mr C.J. Delany, S.C. | Gadens Lawyers |
| For the Respondent | Mr J.D. Merralls, Q.C. with Mr C.J. Horan | Solicitor for the Commissioner of State Revenue |
CHERNOV, J.A.:
I consider that, for the reasons given by Nettle, J.A., the application for leave to appeal should be refused.
NETTLE, J.A.:
This is an application for leave to appeal from a judgment given in the Commercial and Equity Division on 1 July 2005. The judge allowed an appeal from a decision of the Victorian Civil and Administrative Tribunal made on 12 August 2004. The Tribunal had set aside an assessment of land tax for the year 2003 on the basis that the whole of the land the subject of assessment was exempt from tax under s.9(1)(j) of the Land Tax Act 1958. The judge reversed the Tribunal’s decision on the basis that the exemption applied only to so much of the land as was physically used and occupied as a retirement village at the relevant time.[1]
[1]The relevant time was 31 December 2002.
The applicant contends that the judge was wrong and that the orders of the Tribunal ought be restored.
The facts of the matter
The facts of the matter and the history of the proceedings are set out and in detail in the judge’s reasons for judgment. For the purposes of this appeal, however, it suffices to say that at relevant times the applicant was the registered proprietor of land at 13-19 Tram Road, Doncaster, being the whole of the land comprised in Certificate of Title, Volume 10385 Folio 187. It purchased the land with the intention of developing it as a retirement village. In November 2000, it obtained a planning permit from the City of Manningham to develop the land as a retirement village in stages, and thereafter it set about developing the retirement village in accordance with the permit in stages. The development plan envisaged 14 stages and, at the
relevant time, the state of development was such that the land fell into two basic categories, as follows:
a) The first category, comprised three completed stages (1, 2 and 3A), and they were occupied by retired persons pursuant to leases that gave them rights to use the residential premises as well as common areas specified in each lease. It was agreed that the first category was exempt from tax.
b) The second category (which was called “the disputed land”) comprised stages 2A and 3B, upon which buildings were under construction, and a further nine stages awaiting future development. There was some development on the disputed land, in the form of services such as sewerage, drainage and roadways running through the land. The undeveloped land was, however, fenced off from the three occupied stages, and, although the residents of the occupied stages had access to stages 8, 9 and 10, they did so pursuant to an informal arrangement rather than as of right under the “common areas” provision of the leases.
The whole of the land was fenced and encumbered by a statutory charge pursuant to s.29 of the Retirement Villages Act 1986 and, so far as staged development had not commenced on part of the land, it was not used or occupied for any purpose other than for retirement village purposes.
The relevant provisions of the Act
At the relevant time the pertinent provisions of the Act were s.3(1) which defined the expression “retirement village”; s.9(1)(j) which contained the exemption; and ss.9(2AA) and 9(2AB) which bore on the scope of the exemption.
Section 9 provided that:
“(1) Subject to this Act –
(j)land which is used and occupied as a retirement village and for no other purpose –
is exempt from land tax.”
Section 3(1) contains the following definition of “retirement village”:
“’retirement village’ means a complex containing residential premises (whether or not including hostel units) predominantly or exclusively occupied by retired persons in pursuance of –
(a)a residential tenancy agreement or any other lease or licence; or
(b) …
(c) ... “
The residents of stages 1, 2 and 3A occupied the premises pursuant to lease of the kind referred to in para (a) of the definition.
Section 9(2AA) provided that:
“Land does not cease to be used and occupied for the purpose of a retirement village merely because any building or improvement on the land is used or occupied for a purpose ancillary to that purpose.”
Section 9(2AB) provided that:
“If the Commissioner is satisfied that part only of land is used and occupied as a retirement village and for no other purpose, the unimproved value of the land must be reduced for the purposes of land tax by an amount calculated in accordance with the formula R = A x B/C where –
R is the reduction in the unimproved value
A is the unimproved value before reduction
B is the area of the land used and occupied as a retirement village and for no other purpose
C is the total area of the land”.
The Tribunal’s decision
The Tribunal gave a number of reasons for concluding that the whole of the land was used and occupied as a retirement village. To begin with, it said that it was enough that the land had no purpose other than for use as a retirement village. It also reasoned that the part of the land on which there were buildings under construction should be regarded as being used and occupied as a retirement village because it was what the Tribunal called “ancillary to the part of the retirement village which is being occupied by retired persons”, or otherwise because it was part of what the Tribunal termed “the whole development”. According to the Tribunal, the same applied to the vacant land awaiting development, because it was what the Tribunal described as “part of the entire complex and ancillary to that complex”. Further, according to the Tribunal, it would have been quite artificial to divide one block of land in the fashion contended for by the Commissioner. The better view, as the Tribunal saw it, was that the whole of the land came within the definition of retirement village because even the part of the land under construction and that which was vacant formed part of the complex within the meaning of the definition.
The judge’s reasons
The judge considered that the Tribunal’s reasoning was deficient in a number of respects. To start with, the judge said, it placed undue reliance on the statutory definition of “retirement village” and the word “complex” in that definition, to the exclusion of the actual terms of s.9(1)(j). Certainly, s.9(1)(j) was directed to land that was used and occupied as a “retirement village”, and plainly enough “retirement village” was defined in the Act as a “complex” and the notion of a “complex” invoked ordinary conceptions of “a whole comprehending in its compass a number…of interconnected parts.”[2] But, as the judge said, the definitions of those terms were not independent ends in themselves which, without more, determined the application of the exemption provision. In the judge’s view, the Tribunal had misdirected itself by treating the definition of “retirement village” as an end in itself.
[2]Oxford English Dictionary.
Next, as the judge observed, it was clear, both from the dictionary definition of the word “complex” and the context in which that word appeared in s.3(1) of the Act, that a “complex” for the purposes of the exemption was something distinct from the land on which it was built. The judge considered that the Tribunal had mistakenly treated the issue as being whether the “complex”, the “retirement village” and “the whole of the land” were co-extensive.
Most importantly, however, the judge said, the Tribunal had missed the critical issue raised by s.9(1)(j), of whether at the relevant time the disputed land was used and occupied as a retirement village and for no other purpose, as opposed to whether the land was held for the purposes of a retirement village. As the judge put it, that question had a temporal aspect to it, which was the consequence of land tax being an annual tax, and so it was to be answered by reference to the state of the land at the relevant time. The Tribunal, however, had in effect ascribed a permanent quality to the disputed land and thereby jumped from a general conclusion as to the disputed land having “no other purpose” than use as a retirement village to a specific conclusion that, at the relevant time, the disputed land was used and occupied as a retirement village.
The correct approach, the judge held, was to ask whether at the relevant time the disputed land was used and occupied as a retirement village and for no other purpose. If it were not so used and occupied, the exemption did not apply.
Finally, the judge said, the Tribunal was in error in taking the view that it would be artificial to divide “a single block of land…into different uses and occupations simply because a particular portion had not reached a particular stage of development.” So far from being artificial, the judge said, s.9(2AB) made it essential to divide up land in that fashion according to how various parts of it were used and occupied at the relevant time.
The exemption did not apply
With respect, I agree with the judge that the Tribunal was wrong to hold that the exemption applied to the disputed land. As the judge stated, correctly, s.9(1)(j) must be read in conjunction with s.9(2AB), and the latter provides expressly for the possibility[3] that the whole of a piece land may be held for the purpose of a retirement village and for no other purpose and yet that only part of the land may be used and occupied as a retirement village at a specified time. Section 9(2AB) does indeed require the sort of compartmentalised approach which the judge adopted, breaking down parcels of land into components and affording exemption only to those components which are used and occupied for the specified purpose at the relevant time.
[3]To which the Tribunal appears to have been oblivious.
The applicant put great store on the fact that the whole of the land was held for the purpose of a retirement village and no other purpose at the relevant time. That may be so. But plainly the judge was right that the point is not simply whether it was held for the purpose of a retirement village. It is whether it was used and occupied as such. I agree with the judge that it was only the part of the land which had been completed which was used and occupied as a retirement village at the relevant time.
The applicant also put great store on the fact that there were partially completed retirement units and services on the disputed land. It contended that those facts were enough to make the disputed land accessory or ancillary to the part which was used and occupied as a retirement village and so to imbue the disputed land with a similar character. I reject that contention too. The fact that there may have been partially completed retirement accommodation on the disputed land no more characterised the disputed land as used and occupied as a retirement village than would a partially completed office block on part of land adjacent to a used and occupied office block characterise the construction site as land used and occupied as an office block. Similarly, the fact that water and power and sewer mains may have crossed the disputed land no more characterised the disputed land as used and occupied as a retirement village than would mains servicing a city office block and crossing a street or vacant block under an easement characterise the street or vacant block as land used and occupied as an office block.
In Council of the City ofNewcastle v. Royal Newcastle Hospital[4] Taylor, J. observed that:
“The word ‘used’ is, of course, a word of wide import and its meaning in any particular case will depend to a great extent upon the context in which it is employed. The uses to which property of any description may be put are manifold and what will constitute ‘use’ will depend to a great extent upon the purpose for which it has been acquired or created. Land, it may be said, is no exception and s.132 itself shows plainly enough that the ‘use’ of land will vary with the purpose for which it has been acquired and to which it has been devoted. It may be used for a public cemetery, for a common, for a public reserve, in connexion with a church or school and so on. Each of the forms of user referred to in the section relate to use by the owner and some of them, no doubt, contemplate a use which is synonymous with actual physical occupation and enjoyment. Others contemplate a use in a less direct form. But where an exemption is prescribed by reference to use for a purpose or purposes it is sufficient, in my opinion, if it be shown that the land in question has been wholly devoted to that purpose even though, the fulfilment of the purpose does not require the immediate physical use of every part of the land. In my opinion where a hospital acquires or sets apart, for a project which may properly be described as a purpose of a public hospital, a tract of land which it considers is the minimum requirement for its contemplated project and thereupon proceeds to carry out that project it, thereby, uses the whole of the land. How its purposes shall be fulfilled is, within reason, for it to decide and, as I have already said, it is nothing to the point to say that it has employed in the project more land than may, upon the views of others, be thought to have been necessary, or that in fact, it has derived no benefit or advantage therefrom in the fulfilment of its purposes.
[4](1957) 96 C.L.R. 493 at 515.
But as Gibbs, J. noted in The Council of the Town of Gladstone v. The Gladstone Harbour Board,[5] in City of Newcastle v. Royal Newcastle Hospital Taylor, J. was dealing with a case where the land was acquired or set apart for a project and wholly devoted to that project which was in fact carried out on the land, although not all the land was physically used. Contrastingly, in a case like the present where the project is still being developed, the land on which the project is being developed is not being used for the purpose for which it will be used once it has been developed. As Gibbs, J. put it, a hospital under construction is not being used as a hospital and land purchased for construction of a church at a future date is not being used as a place of worship, and a warehouse undergoing alterations so that it may be used as a bonded warehouse is not being used as a bonded warehouse.
[5][1964] Qd.R. 505 at 525.
Of course, as Gibbs, J. said, Newcastle City Council v. Royal Newcastle Hospital establishes that land may be “used” although enjoyment is derived from it without physical occupation. Thus, for example, a garden or recreational facility forming part of a retirement village may satisfy the description of land “used… as a retirement village”. But even then, what is in contemplation is land which is presently being used in that fashion and not land which simply may or even will be used in that fashion at some time in the future.
The applicant argued that the use and occupation of land is to be determined by reference to the chief use of the land at the relevant time, and it relied in support of that contention upon the judgment of Crockett, J. in Abbott v. Commissioner of LandTax[6] and the judgment of Adam, J. in Mayor, Councillors and Citizens of theCity of Essendon v. Cox.[7] But in my view, each of those decisions and the matters with which they were concerned are largely beside the point.
[6][1985] V.R. 164 at 166.
[7][1967] V.R. 545 at 552-5.
In Abbott, the question was whether land fell within the exemption in s.9(1)(ha) of the Land Tax Act 1958, as it then was, for land comprised in one parcel which was used solely or primarily for the business of primary production. The land in question was some 209 acres at Warrandyte on the banks of the Yarra River which had once been used wholly for primary industry but of which some 83 acres had since been leased to the Wattle Park Golf Club for the development of a golf course. Crockett, J. held that the word “primarily” meant “chiefly” or “principally” and on that basis that the judge below had been correct to conclude that the land did not come within the exemption. King, J. reached a similar view on the basis that the section required one to look at the primary use of the land. He held that, although the majority of the area of the land was still given over to primary industry, the primary production activities were only desultory. Accordingly, the primary use of the land was its use as a golf course.
Cox was concerned with a question of whether the parts of a race course which were devoted to car-parks, totalizer and refreshment booth concessions were land which was used “for outdoor sporting or recreational purposes” within the meaning of the Cultural and Recreational Lands Act 1963. Unsurprisingly, Adam, J. held that the matter was to be decided on the basis of the essential use of the land and that the provision of car-parks and tote and refreshment booths for racegoers was so much part of the purposes of the race course as properly to be characterised as land that was used for outdoor sporting or recreational facilitates.[8]
[8]Commissioner of State Revenue v. Australian Football League [2006] VSCA 24 at [20]-[21].
Neither case was concerned with the question of whether land was used and occupied as a facility of a named kind and in neither case was there an exemption couched in terms of use and occupation like s.9(1)(j) and a provision like s.9(2AB) which specifically provides for the possibility of parts of land to be used and occupied for a specified purpose while other parts are not.
Comparison of ss.9(1)(j) and 9(2AB) with other exemptions provided for in s.9(1) suggests that the draftsman took considerable care to narrow the exemption to land actually used and occupied as a retirement village, as opposed to land which is used or held for the purposes of a retirement village. As counsel for the Commissioner submitted, the specificity of the language of s.9(1)(j) strongly implies that the draftsman was conscious of the differing views expressed by members of the High Court in cases like Newcastle City Council v. Royal Newcastle Hospital[9] and Eaton & Sons Pty Ltd v. The Council of the Shire of Warringah,[10] as to whether land was used for a designated purpose. The draftsman has eschewed reference to use for a [specified] purpose, and instead employed the expression “used and occupied as a retirement village” in order to ensure there can be no doubt that the exemption is not engaged unless land is actually used and occupied as a retirement village at the relevant time. Similarly, the terms of s.9(2AB) appear as plainly directed to ensuring that land which is not fully used and occupied is not characterised according to the principal part of it which is used and occupied.
[9](1957) 96 C.L.R. 493.
[10](1972) 129 C.L.R. 270
Reference to the extrinsic materials confirms those impressions. The exemption for which s.9(1)(j) provides was modelled on the amendments made to the Land Tax Management Act 1956 (NSW) by the Land Tax Management (Further Amendment) Act 1990 (NSW)[11] and, because the exemption and the qualifying provisions comparable to s.9(2AB) appear in the New South Wales legislation in one section close together, it appears even clearer that what was intended was to limit the exemption to land actually used and occupied as a retirement village at the relevant time.
[11]See the Report of the Land Tax Review Victoria, 1991, at 67.
Finally, the applicant submitted that the question of whether land is occupied is a question of fact, which no doubt it is,[12] and, based upon observations of the Privy Council in the Newcastle City Council v. Royal Newcastle Hospital, the applicant contended that it is possible for land to be occupied without physically occupying the whole of it. The example which the Privy Council gave in that case was of woodlands forming part of a farm. The farmer may not go into the wood from one year’s end to another and yet one would not hesitate to say that the farmer occupied the woodland. Thus it was submitted that it was open to the Tribunal to find as it did that the whole of the land was occupied as a retirement village at the relevant time.
[12]Newcastle City Council v. Royal Newcastle Hospital [1959] A.C. 248 at 255-6 (PC).
That contention is not persuasive. The Privy Council’s observations must be read in context. What suffices for occupation by a farmer of woodlands does not necessarily suffice for occupation of a retirement village. As has already been observed, a garden or recreational facility forming part of a retirement village may satisfy the description of land used and occupied as a retirement village. But the garden or other facility must be used and occupied in that fashion at the relevant time as part of a functioning retirement village.
In any event, the Tribunal’s analysis was erroneous. It ignored the operation of s.9(2AB) and proceeded by reference to general conceptions applicable to the characterisation of the use of land. On that basis it found that the whole of the land was used and occupied as a retirement village within the meaning of s.9(1)(j) because part of it was so used and occupied and that the use and occupation of the balance was to be characterised by reference the former. The Tribunal’s error was, therefore, an error of principle. That error of principle vitiated its finding of fact. And the judge was correct so to hold.
I add three further points for the sake of completeness. First, I respectfully take leave to differ with the learned judge as to which part of the land should be regarded as the “complex”. As has been seen, the Tribunal said that it was the whole of the land. The judge held that it was the buildings. In my view, it was comprised of so much of the land as was used and occupied as a retirement village at the relevant time, whether that be by way of buildings or open space or other facilities, so long as they were dedicated to the use and occupation of the residents of the retirement village and were so used and occupied by them at the relevant time.[13]
[13]In this case it may not make any difference. The parties were agreed that first part of the land was exempt. The dispute was only ever about the disputed land and, whatever view one takes of the extent of “complex”, it is plain that none of the uncompleted phases of the development were used and occupied as a retirement village at the relevant time.
Secondly, although I am clear that the judge was right to hold that the disputed land was not within the exemption, it might have been different if, in addition to drainage and power easements, the residents of the completed sections of the retirement village had had rights of use and occupation over the disputed land. As already noticed, if the disputed land had been developed and completed and available for use as a garden or recreation facility or other common area for the use of the residents of the completed section of the development, I consider that it would have been part of the complex that was used and occupied as a retirement village at
the relevant time. Contrastingly, however, the fact that the residents of the completed phase of the village may have had an informal arrangement to obtain access to some of it was no more significant to the characterisation of that land than would be the fact of informal access to any other building site.
Thirdly, because the question of use and occupation is one of fact and degree, each case will turn to a greater or lesser extent on its own facts and circumstances and, therefore, it is impossible to lay down proleptically how much facilities must be used and occupied before they qualify for exemption. Nevertheless, in a case like the present, where a retirement village is being developed in discrete phases, I do not consider that it can be said of land on which a phase is being constructed that it qualifies for exemption until and unless the residences which comprise that phase have been completed to the point that they are available for use and occupation and at least one of them in that phase is in actual use and occupation by a resident. Until then it seems to me that it is simply a case of the phase being developed and therefore not being used and occupied as the thing for which it will be used and occupied once it has been developed.
Conclusion
For the reasons given, I would refuse the application for leave to appeal.
REDLICH, J.A.:
I have had the advantage of reading the draft reasons for judgment of Nettle, J.A. and I agree, for those reasons, that the application for leave to appeal should be refused.
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